How to ensure you really need your insurance

By Martin Lewis, December 16, 2013

Are you walking out in the world naked? Insurers try to scare you into thinking you are if you do not buy their cover. The right policy is a suit of armour protecting you from the world’s randomness — but what’s necessary, what’s nonsense, and how do you cut the cost?
I’ve given each major type a “need score” – of course, it’s a rough estimate, and varies for each individual. To state the bloomin’ obvious, the score assumes you actually have the thing being insured – so if you don’t have a pet, pet insurance is a zero.

CAR INSURANCE Need score 10/10
If you own a vehicle, the law says you need insurance even if you don’t drive it, unless you get a Statutory Off-Road Notice to declare it off-road. Insurers take advantage by continually renewing, often at ever-increasing prices. Regularly check if you are being overcharged. To cut the cost:
a) Get max quotes in min time. Different comparison websites look at different insurers, so combine as many as you have time for. My current order is: www.gocompare.com, www.google.co.uk/carinsurance and www.moneysupermarket.com.
b) Check insurers they miss. Two big insurers are missed here, and can be competitive, so always add in www.directline.com and www.aviva.co.uk.
c) More than one car in the home? Comparisons don’t search for multi-car discounts. Manually check www.admiral.com, www.directline.com and www.aviva.co.uk.
d) Do not assume third party is cheapest. Selecting comprehensive cover makes some insurers consider you a lower risk – this can outweigh the fact third party is lesser cover, so check both.

BUILDINGS INSURANCE Need score 9.5/10. Contents: need score 8/10
l Mortgages require you to have buildings cover. Even if your mortgage is paid off, risking losing your home is a big gamble, so this cover is also high up the list.
Yet even then, only insure its rebuild value — the cost of rebuilding the property if it was knocked down. Many overpay by covering its market value.
Contents cover isn’t compulsory, but risking all your possessions is, well, risky. Many under-cover, which risks you only getting a partial payout if you claim.
For the most quotes in the least time, try www.confused.com, www.comparethemarket.com, www.gocompare.com and www.tescocompare.com. Again, add www.aviva.co.uk and www.directline.com that they miss.

TRAVEL INSURANCE Need score 8/10
l With cover from as little as £7, taking medical risks when you travel is just not worth it. Travel insurance gives medical cover abroad, which is needed outside Europe.
Even in the EU, while a free EHIC card gives medical treatment at the same cost as locals, you may still have to pay and you don’t get cover for baggage, repatriation. So why risk it?
For single trip cover, to find your cheapest use the www.moneysupermarket.com comparison. If you go away two or more times in a year, get an annual policy. www.coverwise.co.uk is currently my cheapest pick, at £14-£26 for an individual, or £23-£40 for a couple under 60. For more choices, see www.moneysavingexpert.com/travelinsurance.

BREAKDOWN COVER Need score 6/10
With modern reliable cars, breakdown cover is needed less. Yet it can be startlingly cheap, so the cost versus risk analysis still means that getting a policy is favourable.
You can often get big discounts on AA and RAC cover if you factor in the rebate of going via cashback sites like www.topcashback.co.uk or www.quidco.com. Alternatively, if you need full cover, www.autoaidbreakdown.co.uk is £39 a year for you and your spouse. Full info via www.moneysavingexpert.com/breakdown.

PET INSURANCE Need score 6/10
A cat’s cataracts operation can cost a whopping £3,000. But let’s be frank — how crucial this insurance is depends on your attitude if your pet is ill. If you’d rip off your left arm to ensure they get all treatments, insurance should prevent hefty vets’ bills.
To compare deals, benchmark a price with www.gocompare.com and www.comparethemarket.com, then add www.aviva.co.uk and www.directline.com.
Dog owners — a warning. By law, cats are free spirits. Dogs aren’t, so if they cause injury or damage, you’re liable. If you don’t have pet insurance (or yours misses this cover), third-party liability cover is max £25 per year from www.dogstrust.org.uk.

MOBILE PHONE INSURANCE Need score 5/10
As smartphones become pricier, insuring them in case of loss or damage is a stronger proposition. Ask yourself how likely that is. If you’ve never lost your phone in 10 years, you could save each month by “self-insuring” in case of problems. If, like me, you’re a loser (of mobiles, that is), insurance often adds up.
My top pick, mixing price and feedback, is www.insurance2go.co.uk at £70 a year for iPhones, or as little as £57 for Samsung smartphones.
If you’ve more mobiles in the family, switch to the Nationwide FlexPlus account at www.nationwide.co.uk/current_account/flexplus, which covers all the families’ phones for just £10 per month (£120 per year).

WARRANTY COVER Need score 2/10
Most warranties sold with electricals are hideously expensive. Shops may try to scare you into getting one. Yet if you look at the likelihood of breakdown, and the cost of the product compared to the warranty, it’s often not worth it. First, you’ve consumer rights which say goods must last a reasonable time. Goods may also be covered by home insurance, so check this too. If you do want a warranty, standalone policies are often cheaper. Try www.warrantydirect.co.uk, www.warrantyshop.co.uk and www.compareextendedwarranties.co.uk to see how it compares.

INSURANCE FOR THINGS YOU DON’T HAVE A NEED FOR Need score 0/10
Shockingly, many people have money dripping out of their accounts each month unnecessarily. Here’s a tweet I received: “I’ve paid £16/mth for SIX YEARS for white goods we no longer have.” So check your direct debits and standing orders now.